LOL!'s Market Timing Newsletter

[NW-Bound]

For such short-term trading, would you consider using leveraged ETFs instead of indexed ETFs? That allows you to deploy less capital, and getting the same gains (or losses)?

 

[LOL!]

For such short-term trading, would you consider using leveraged ETFs instead of indexed ETFs? That allows you to deploy less capital, and getting the same gains (or losses)?

Nope, I would not use leveraged ETFs.

I'm not trying to make a killing here; I'm trying not to get killed. If this kind of stuff gets me a 0.5% better return for the year than my benchmarks, then I am happy.

 

[NW-Bound]

No, it is not at all about making a killing.

For example, instead of buying $100K of an indexed ETF, you would buy only $50K of a 2X leveraged ETF. In the short term, if the former moves by 2.5%, the latter would move by 5%, so that 2.5% of $100K is the same as 5% of $50K.

My point is that leveraged ETFs can be advantageous for short-term trading or hedging, while requiring less capital deployed for the same strategy. Used sparingly, they are not at all risky, and same as with option trading, only the pigs get slaughtered.

There are even 3X leveraged ETFs, and I have used them in the past. A problem I have had is that over longer terms like a few months, the tracking error increases, and that 2X or 3X factor dropped.

 

[LOL!]

OK, let me know how that works out for you. You can post your trades in near-real-time in this thread just like I do. I've already lost some money on my purchase made earlier today. I do take comfort in the fact that my percentage of equities has dropped a bit since Oct 3rd.

 

[NW-Bound]

The use of 2X or 3X leveraged ETFs for short-term trading is to allow one to use only 1/2 or 1/3 of the dollar amount to make a trade. Today, your VBR dropped 1.16% while a 2X leveraged ETF like MVV dropped 2.59%. I could lose or gain roughly the same dollar amount you do, but by committing only 1/2 the dollar amount in principal. That helps me to avoid selling something and having to pay cap gain tax, or even getting money from my I-bond and also paying taxes.

Whether a tactical short-term move makes money or not depends on one's timing, and that is really the real driver. The use of leveraged ETFs is just another twist. Another problem with this is that some of these are very thinly traded, i.e. too illiquid compared to the normal ETFs. On the other hand, some 3X ETF like SOXL (semiconductors long) and SOXS (semiconductors short) have even higher daily volumes than the Vanguard straight ETFs. I suspect that institutional or big investors use these for hedging.

Anyway, I was tempted to do something today, but didn't. Maybe in a few days...

PS. SOXL dropped 3.65% today, while SOXS gained 4.2%. They are supposed to move exactly opposite, but don't always. When I buy for short-term trades, I like these volatile guys. They bounce like yo-yo, and one can have the same "fun" for 1/3 the admission price!

 

[Nords]

I've already lost some money on my purchase made earlier today.

If you meant to do it then you haven't lost money, you just call it "tax-loss swap selling" followed by "averaging down"...

 

[LOL!]

With yesterday's drop in VBR (small-cap value) of more than 2.5%, I was compelled to purchase some shares. I sold some VCSH (short-term corporate bond index) in order to raise money for the VBR shares.

I intend for this to be a short-term trade and will sell these VBR shares within a week or two whether they go up or down.

Sold all these recently bought shares of VBR for a small profit earlier today.

 

[LOL!]

It has been 2 months since October 3. Since then, US stocks are down about 2% (they were down as much as 6%) while international stocks are up about 2%. Bonds haven't done anything either. My portfolio really has not in changed in total value.

Back to waiting ....

 

[LOL!]

Another month and a Fiscal Cliff are now behind us.

Since Oct 3rd thru yesterday, the S&P500 index fund that I sold (FUSVX) has returned about +1.4%. An international fund FSIVX is up +8.8% since then and bonds FSITX are down -0.3%. (None of these numbers contain today's actions.)

So just cruising along. No actions suggested at this time.

 

[NW-Bound]

So, I mentioned SOXL, a triple-leveraged ETF, that I have used as a market timing vehicle. As the semiconductor industry has a higher beta than the S&P500, SOXL can easily have 4 to 5 times the short-term fluctuation of the latter.

I currently hold 1% of portfolio in SOXL, which I accumulated in the past couple of months. It closes today at $29.77, and I have bought at a price as low as $21.50. However, as my timing was far from perfect, and I was buying it on the way down when it was higher than $21.50, at this point I only have a 10% gain on this position.

Just sold off 1/4 of it, and wrote a covered call on 1/6 of it. If that call gets exercised on May 2013, that would be a 25% gain on those shares. I still do not know what to do with the rest.

As you can see, it's just a lark with 1% of portfolio. I have had some gains with this game, and made perhaps 15% to 25% gain on investment over a trading period of up to 6 months. It was not enough money to add that much to portfolio annual gain, but a lot more interesting to me than going to Las Vegas.

 

[Free To Canoe]

So, I mentioned SOXL, a triple-leveraged ETF, that I have used as a market timing vehicle. As the semiconductor industry has a higher beta than the S&P500, SOXL can easily have 4 to 5 times the short-term fluctuation of the latter.

I currently hold 1% of portfolio in SOXL, which I accumulated in the past couple of months. It closes today at $29.77, and I have bought at a price as low as $21.50. However, as my timing was far from perfect, and I was buying it on the way down when it was higher than $21.50, at this point I only have a 10% gain on this position.

Just sold off 1/4 of it, and wrote a covered call on 1/6 of it. If that call gets exercised on May 2013, that would be a 25% gain on those shares. I still do not know what to do with the rest.

As you can see, it's just a lark with 1% of portfolio. I have had some gains with this game, and made perhaps 15% to 25% gain on investment over a trading period of up to 6 months. It was not enough money to add that much to portfolio annual gain, but a lot more interesting to me than going to Las Vegas.

I lost my prognosticator company to the semiconductor industry due to a buy out recently.

Cymer, Inc.: NASDAQ:CYMI quotes & news - Google Finance

Guess I will have to rely on the time honored truisms of this newsletter.

 

[LOL!]

...
Guess I will have to rely on the time honored truisms of this newsletter.

Yep, you can start losing money TODAY!

 

[NW-Bound]

But see how much fun you can have while losing!

I never care to gamble at Las Vegas, and think that taking some chances in the stock market would be a better pastime. It requires some patience, and the game is played out over a longer period than the few seconds to deal a hand. And in contrast with a card game, the result is never final, unless one chooses to quit. To borrow from Bob Dylan,

And don't speak too soon
For the wheel's still in spin
And there's no tellin' who
That it's namin'
For the loser now
Will be later to win
For the times they are a-changin'.​

And indeed, whether one is an active investor or not, or even if one puts his net worth in CDs, the whole investment thing really is a battle for survival as Gerald Loeb described in his classic book.

 

[heeyy_joe]

Observed recently on Yahoo Finance:

The debt ceiling crises has risk, mostly to the downside.

Uh, OK, in other news the world is round!

 

[NW-Bound]

Seeing that Intel is under pressure today due to weak projection of PC sales, and SOXL is based on the SOX index which has Intel as the largest component, I have sold most of my SOXL positions, and keep only 100 shares for now.

Well, there are some additional shares that I have to hold because I already sold call options on them. As these options are already "in the money", these shares are considered sold, but the options will not expire till May 2013. So, the book is not truly closed, but if SOXL just threads water I will have made about 30% on my initial investment.

As I only committed 1% of portfolio on this bet, a 30% gain does not make me rich, but will be plenty to pay for my RV travel expenses in 2013. But then again, the book is not closed and I do not know for sure until the options settle.

 

[LOL!]

Another month and a great January is now behind us.

Since Oct 3rd thru Friday, the S&P500 index fund that I sold (FUSVX) has returned about +5% with most of the gains coming this past month. An international fund FSIVX is up +12.3% since then and bonds FSITX are down -1%. So I would've been better off not doing anything, but I have reduced portfolio risk which I really like.

Overall portfolio has gained about 1.5X the amount of money used to change allocation back in October (how's that for a convoluted statement?), so a rebalancing might soon be in order except I will use new contributions to 401(k) plans do it on-the-fly. All 401(k) contributions so far in 2013 are going into fixed income funds.

I suppose next up will be waiting for more Federal budget stuff.

 

[LOL!]

Small/mid cap equities have been doing relatively well in the past few months, so well that I am more than 5% (of total portfolio) out-of-balance and need to sell some. So in my 401(k) I just submitted an exchange order to go from FSEVX (US extended market index) to FSITX (Total bond index).

Soon I will need to go from FSEVX to FUSVX (S&P500), but I prefer to do this on a day where the corresponding ETFs (say VXF and VOO) have changed differently in my favor. That is, VXF up and VOO down, or VXF up 1% and VOO up 0.5%, or VXF down 0.5% and VOO down 1%. You get the idea I hope. Today is not such a day with both of these up about 0.65% at the moment.

 

[bondi688]

Martin Zweig passed away on Monday at the age of 70.

Master Market Timer Had Front-Row Seat - WSJ.com

Video Of Martin Zweig Calling The 87 Crash - Business Insider

He had also created the now well known and widely followed "put to call ratio".

He will be missed.

 

[heirloom]

Small/mid cap equities have been doing relatively well in the past few months, so well that I am more than 5% (of total portfolio) out-of-balance and need to sell some. So in my 401(k) I just submitted an exchange order to go from FSEVX (US extended market index) to FSITX (Total bond index).

Looks like you rebalanced just in time!!

We just went to a quarterly review and I'll have to go through the leaflets to remind me of which sectors perform better in a mid cycle recovery.

I'm debating between HLS or HMA or a little of both. One is a chain of small hospitals and HLS is therapy specialists. They also have rooms for patients that need to stay for a while...stroke victims, etc. HLS just got moved up one position in the index they are in. With boomers aging, more people will be needing hip/knee replacements and a place to go for therapy.

 

[audreyh1]

Small/mid cap equities have been doing relatively well in the past few months, so well that I am more than 5% (of total portfolio) out-of-balance and need to sell some. So in my 401(k) I just submitted an exchange order to go from FSEVX (US extended market index) to FSITX (Total bond index).

Soon I will need to go from FSEVX to FUSVX (S&P500), but I prefer to do this on a day where the corresponding ETFs (say VXF and VOO) have changed differently in my favor. That is, VXF up and VOO down, or VXF up 1% and VOO up 0.5%, or VXF down 0.5% and VOO down 1%. You get the idea I hope. Today is not such a day with both of these up about 0.65% at the moment.

Looks like you nailed a (near-term) top. 2-19 was the equity high YTD, and interest rates dropped today.

 

[LOL!]

@bondi, I really liked Marty Zweig on Wall Street Week. He was always a little dour and seemed perpetually worried. He was so nervous when he hosted the show, too. Thanks for the link to the WallStreetWeek episode, very nostalgic to me from the intro music (what great editing to have it match the video cuts), Louis's commentary (pay attention to his talk about record drops in the Dow which will make you laugh today). The video deserves it's own thread.

As for timing, I would be lying if I said I was not feeling good about the recent transaction. However, I am worried that this little blip will be short-lived and things will go back to marching upwards. Good luck everyone!

 

[rbmrtn]

Martin Zweig passed away on Monday at the age of 70.

Master Market Timer Had Front-Row Seat - WSJ.com

Video Of Martin Zweig Calling The 87 Crash - Business Insider

He had also created the now well known and widely followed "put to call ratio".

He will be missed.

Had not seen that. I wondered what he was up to. He was a regular on "Wall Street Week". I got his newsletter for many years and read many of his books back in the 80s when I was just starting with investing.

 

[LOL!]

So another month has gone by. My portfolio would have a higher value if I had stayed in stocks since October, but my risk level is way down. Portfolio value has still increased in that time.

Even FSEVX has closed higher than since some shares were sold on 2/19 despite an intervening ~4% drop. That was a quick dip and recovery in which I had no buys. I am still overweighted in small-cap US and underweighted in US large-cap (see post #92) so still need to do an exchange.

Oh well, this market timing thing is hard and boring.

 

[haha]

@bondi, I really liked Marty Zweig on Wall Street Week. He was always a little dour and seemed perpetually worried. He was so nervous when he hosted the show, too.

I liked him too. A great contrast to Carter Randall, who seemed to be mostly zonked on Valium. Marty's face did the worry thing better than anyone I've seen except Helen Hunt.

Ha

 

[LOL!]

....
Soon I will need to go from FSEVX to FUSVX (S&P500), but I prefer to do this on a day where the corresponding ETFs (say VXF and VOO) have changed differently in my favor.

Since VXF was looking to be up more than VOO (0.87% vs 0.56%) today, I submitted an exchange of FSEVX to FUSVX in my 401(k) before the close today.

This exchange should bring me closer to my desired balance between US large-cap and US small/mid-cap equities.

If one charts at Morningstar the "growth-of" FSEVX and FUSVX since 2/19, they are probably about even. I hope tonight when I look that FSEVX has edged ahead, but it is so close that it might not have. Certainly, since the beginning of the year, FSEVX has outperformed FUSVX. Is it a bad move to fight momentum and sell the better performer?